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Analysts On Why The Simon-Jamestown Deal Is A Savvy Move For Both Sides

Simon Property Group, the largest owner of malls in the United States, is buying urban street mixed-use acumen in its purchase of a 50% stake in Atlanta-based developer Jamestown.

Ponce City Market, in the Old Fourth Ward neighborhood in Midtown Atlanta.

While the price of the deal — which is scheduled to close by the end of the year — was not disclosed, one retail equity analyst estimates Simon would pay Jamestown's co-founders, Christoph and Ute Kahl, roughly $130M for the stake.

With a little more than $13B of assets under management, Compass Point Research & Trading Managing Director Floris van Dijkum estimates that Jamestown’s valuation, conservatively, would be 2% of that total, he wrote in a report.

What Simon gets in the deal, experts said, is access to the prowess of the developer that has turned old industrial properties in New York, San Francisco and Atlanta into some of the most prominent mixed-use redevelopments in the country. 

“This appears to be a case of Simon taking a step further into bringing mixed-use development and redevelopment expertise into the fold,” Green Street Senior Analyst Vince Tibone told Bisnow in email.

In turn, Jamestown gets access to Simon’s deep pockets and its co-founders — who are retaining some equity in the company — are taking the opportunity of stepping back from day-to-day operations of the company as it embarks on its "next chapter," Jamestown President Michael Phillips said in a statement.

Jamestown CEO Matt Bronfman and Phillips retained their stake in the firm and will continue to operate the firm as a separate entity.

“I have questioned some of Simon Property Group’s recent purchases, but purchasing [half] of Jamestown makes a lot of sense,” Robert Fransen, president of Atlanta-based developer Coro Realty Partners, wrote on his LinkedIn page. “Good for Jamestown for cashing in just before the bottom drops out of U.S. real estate." 

Jamestown has made more than $35B of real estate transactions in its nearly 40-year history in funds raised with equity from high net worth German investors, and in 2019 starting launching crowdfunding vehicles for specific properties.

“A fund management platform could be a way for [Simon] to gain access to capital when public markets for equity are shut, like they are today,” van Dijkum wrote in the report. “The investment would bring SPG into fund management as well as broadening the company's reach to more urban, mixed-use projects and urban street retail."

In markets like Atlanta, Simon’s investment also helps it corner the luxury retail market in Buckhead. Simon owns both Lenox Square and Phipps Plaza — two of the Southeast’s most successful indoor malls with an estimated $1,400 per SF and $1,200 per SF in sales, respectively, according to Compass Point.

With its ownership stake in Jamestown, it now also has a stake in Buckhead Village, an ultra-luxury retail mixed-use district 2 miles south of the malls. 

Jamestown has gained national prominence for developing food hall-anchored mixed-use projects out of old industrial buildings, such as Ponce City Market in Atlanta and Chelsea Market in Manhattan, which it sold to Google for $2.4B.

Simon, a publicly traded real estate investment trust, didn't have to disclose the purchase in a Securities and Exchange Commission filing because the purchase price was immaterial to its more than $28B market capitalization, analysts said.